2014 (6) TMI 131 - AT - Central Excise

Classification of Toys and Games as CSH 9504.90 as games as contended by the Revenue or by CSH 9503.00 as toy/puzzle - educational toys - toys and games of children - 1. Beeline 2. Disney Telespin 3. Disney Sorry 4. Disney Chip N Dale 5. Game of Games 6. Duck Tales 7. Monopoly Junior 8. Pay Day 9. Hotel 10. City Games (Paris) 11. City Games (London) 12. Games of States (USA) 13. Games of States (India) 14. Travel Ludo 15. Travel Snakes & Ladders 16. Travel Chinese Checkers 17. Dragster 18. Stratego 19. Fox & Geese 20. Travel Chess & Draughts 21. Leverage 22. Mould and Paint - Majority order. It is settled law that when a heading in the Central Excise Tariff is based on and is identical to a heading, the explanatory notes to that heading in the HSN have persuasive value for determining the scope of the same heading in the Central Excise Tariff, unless a different intention is indicated on the Tariff itself. Classification of the game Fox & Geese - held that - This game is more like the game of chess and involves skill and its outcome depends mainly upon the skill of the player. There is also an element of competitiveness. - this game has to be classified as a game under sub-heading 9504.90 of the Tariff. Other three games Chip N Dale , Duck Tale Disney , and Rally , all these games are board games i.e. are the games which involve movement of pieces on a premarked surface called Board according to a set of rules and usually have a goal which a player aims to achieve. The contention of the appellant is that since in Chip N Dale , Duck Tale Disney and Rally , there is no element of skill and outcome of these games is dependent only on chance, these games are purely for amusement of children and hence the same have to be treated as toys covered by Heading 95.03. - this plea of the appellant is not correct. In terms of the criteria for Games , as prescribed by the Apex Court in its judgment in the case of Pleasantime Products Vs. CCE Mumbai-I (2009 (11) TMI 5 - SUPREME COURT), this game, which is a board game, has to be classified as a game under sub-heading 9504.90 of the Tariff. In view of majority order, the following items are classifiable as Toys under Heading 9503 of CETA, 1985 - 1. City of Games (Paris), 2. City of Games (London), 3. Games of States (USA), 4. Games of States (India), 5. Match & Move Memory, 6. Mould & Paints, 7. Game of Games and 8. Go To The Heads of Class. The other items, except as mentioned above, would be considered as Games classifiable under Heading 9504 of CETA, 1985 and the demand of duty along with interest is upheld and the penalties are set aside. The Hon ble Supreme Court directed that the demand of duty should be restricted for the normal period of limitation under Section 11A of the Central Excise Act, 1944 - personal penalty imposed on Shri S.K. Pathi set aside - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Classification of 31 items manufactured by the Assessee under CSH 9504.90 or CSH 9503.00.
2. Demand of duty and penalties imposed on the Assessee and its Manager.
3. Application of the tests enunciated by the Hon'ble Supreme Court in Pleasantime Products Vs. Commissioner of Central Excise, Mumbai-I.

Issue-wise Detailed Analysis:

1. Classification of Items:
The Tribunal was directed by the Hon'ble Supreme Court to examine whether each of the 31 items manufactured by the Assessee would be classified under CSH 9504.90 as games or CSH 9503.00 as toys/puzzles. The items included various board games and educational toys such as "City Games," "Match & Move Memory," "Pay Day," "Hotel," "Travel Ludo," "Travel Chinese Checkers," and others.

Educational Toys:
- City Games (Paris, London, USA, India): These were classified as educational toys under CSH 9503.00. The Tribunal found that these games educate children about different locations and cultures, with clues given in the cards and predetermined outcomes.
- Match & Move Memory: Classified as an educational toy as it helps develop visual recall skills, with clues given in the picture spaces and no element of chance.
- Mould & Paint: Classified as an educational toy under CSH 9503.00, as it involves creating objects and painting them, improving concentration and creativity.

Games:
- Pay Day, Hotel: Classified under CSH 9504.90 as games. These involve elements of chance and skill, with no fixed outcomes and no clues provided.
- Travel Ludo, Travel Chinese Checkers, Travel Chess & Draughts: Classified under CSH 9504.90 as games. These are reduced-size versions of board games, involving competitiveness and skill.
- Disney Sorry, Leverage, Junior Monopoly, Disney's Tale Spin: Classified under CSH 9504.90 as games. These involve elements of chance, skill, and competition, with no predetermined outcomes.

Toys:
- Chip N Dale, Duck Tales Disney, Fox & Geese, Rally: Initially classified as toys by one member, but upon review by a third member, classified as games under CSH 9504.90 due to elements of chance and skill, and competitiveness.

2. Demand of Duty and Penalties:
The Tribunal upheld the demand of duty for items classified under CSH 9504.90, as directed by the Hon'ble Supreme Court to be restricted to the normal period of limitation. However, penalties imposed on the Assessee and its Manager were set aside, as the Assessee had declared all items in their Declaration under Rule 173B of the erstwhile Central Excise Rules, 1944, and it was a case of classification dispute.

3. Application of Tests from Pleasantime Products Case:
The Tribunal applied the tests enunciated by the Hon'ble Supreme Court in the Pleasantime Products case to distinguish toys, puzzles, and games. The tests included:
- Outcome is predetermined in a puzzle but not in a game.
- Clues are given in a puzzle but not in a game.
- Luck lacks in a puzzle, unlike in a game.
- Element of chance and skill is absent in a toy.

Conclusion:
The Tribunal concluded that out of the 31 items, 12 items were classified under CSH 9503.00 as toys/educational toys, and the remaining items were classified under CSH 9504.90 as games. The demand of duty was upheld for items classified under CSH 9504.90, but penalties were set aside. The decision was based on the application of the tests from the Pleasantime Products case, HSN explanatory notes, and product literature and instructions for each item.